North South University
Course: Introduction to Financial Management
Course Code: FIN254
Section: 29
Semester: Summer 23
Group Report on:
Ration Analysis of GPH ISPAT & BSRM STEEL
Date of Submission:
Submitted to:
Ms. Shanila Taneem (SnT)
Senior Lecturer
Department of Accounting and Finance
School of Business and Economics
North South University
Submitted By:
Name I.D Serial No.
Tahseen Anzum 2221533630 22
Rahid Mostafa 2221598630 29
Hasif Bin Saeed 2221630630 21
Hamed Hassan Chowdhury 2222871630 20
Fidda Safwa 2222951030 31
Letter of Transmittal
Date
Ms. Shanila Taneem
Department of Accounting and Finance
North South University
Dhaka 1229, Bangladesh
Subject: Submission of the Final Report on the ration analysis of BSRM STEEL LIMITED
and GPH ISPAT
Dear Ma’am,
It is a great pleasure to submit our final report on The ratio analyses of both BSRM STEEL
LIMITED and GPH ISPAT LIMITED and compare the two. During our work on these
companies, we learned a great deal about both firms' finances and management. We thank
you from the bottom of our hearts for your valuable guidance, direction, and support.
Working on this opportunity under your guidelines has been a great privilege. We believe we
could meet the report's objectives and hope you will accept it.
Thank you very much for your support and guidelines.
Best Regards,
Tahseen Anzum - 2221533630 (20)
Rahid Mostafa – 2221598630 (21)
Hasif Bin Saeed – 2221630630 (22)
Hamed Hassan Chowdhury – 2222871630 (29)
Fidda Safwa – 2222951030 (31)
Acknowledgement:
This study needed much direction and help from many people to be completed successfully.
We count it a joy to collaborate with and get help from such individuals.
We sincerely appreciate and respect Ms. Shanila Taneem, a reputable North South University
School of Business and Economics faculty member. Without her assistance, the task would
not have been possible.
Executive summery
BSRM STEEL LTD and GPH ISPAT are two juggernauts of the steel manufacturing
industry in Bangladesh. Both companies are based in Chittagong and are listed in the Dhaka
Stock Exchange and Chittagong Stock Exchange. BSRM STEEL is the market leader and a
pioneer of the industry and has existed since 1952. On the other hand, GPH ISPAT is a new
firm that was seen a meteoric rise through cutting edge technology and innovation.
From an investors perspective both firms appear to be a lucrative investment
opportunity. But what if you could only invest in one. Which one is the better proposition for
investment. We answer this exact question in this report by conducting seventeen different
ratios with information gathered from their respective annual reports. We provide an answer
based on quantitative facts and generally accepted financial philosophy and theories, along
with the leant knowledge from our FIN254 course.
Table Of Contents:
Introduction and Briefs about the companies.……………….1
Current and Quick Ratios……………………………………2
Inventory turnover and Average Age of Inventory………….3
Total Asset Turnover and Average Collection Period………4
Average Payment period and Dept Ratio…………………....5
Times Interest Earned and Gross Profit Margin…………..…6
Operating profit margin and Net profit margin……………...7
Earnings per share and Return on Asset…..…………………8
Return on Equity and Price/Earnings Ratio……………........9
Market/Book Ratio and Conclusion and recommendation...10
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Introduction:
Financial ratios allow investors, creditors, and management to measure and interpret a
company's performance on several characteristics. Financial ratios may reflect a firm's
liquidity, profitability, ability to pay debt, etc. The information required for ratio analyses is
gathered from a company’s financial ratios, which can be found in its annual report. In this
report, we have gathered such information for BSRM STEEL LTD. and GPH ISPAT LTD. to
conduct liquidity, activity, profitability, and market ratios throughout the last three years and
ultimately decide which company is the best fit for investment. We will reinforce our
decision with generally accepted financial concepts and topics learned from the course.
Briefly about the two Companies
BSRM STEEL is a pioneer in the steel manufacturing industry in Bangladesh. The love child
of five Indian entrepreneurs, BSRM started in 1952 as a steel re-rolling mill just outside of
Chittagong. Now, the company is listed in both DSE and CSE and has a market valuation of
1.6 billion USD with over 45% of the market share of steel manufacturing in Bangladesh. It
is headquartered at Sadarghat Road, Chittagong.
The name GPH is an acronym with G standing for God-Fearing,
P for Plain Living, and H for High Thinking. GPH ISPAT began
its journey in 2006 and became publicly listed in 2012 in both
DSE and CSE and is worth around 588 million USD. The
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company has been able to capture 3% of the nation's steel manufacturing industry. It is also
headquartered and manufactures in Chittagong.
Liquidity ratios
1. Current ratios
Time-series: The data for BSRM
Steels Limited shows that its
current ratio current ratio has
increased from the previous year.
This shows the company has
improved its short-term liquidity.
position.
The current ratio of GPH Ispat
shows that the ratio is constant
over the years. The company has
a stable liquidity position thus
can manage their working capital
effectively.
Cross-sectional: The current ratio
of GPH has been remarkably
stable through the years but
BSRM’s is still greater, giving
them greater control over short
term operations.
2. Quick ratios
Time-series: The quick ratio
of GPH Ispat is on a
downwards trend. This means
the firms reliance on
inventory has been
increasing.
Quick ratio of BSRM’s is
gradually. This shows that
they aren’t as reliant on
inventory as means to pay for
short term obligations.
Cross-sectional: BSRM has
improved their position their
before and hold a better
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immediate dept paying ability than GPH, who hasn’t been able to recover since the
pandemic.
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Activity ratios
3. Inventory turnover
Time-series: BSRM’s inventory
turnover took a dip 2020 possibly
due to the price of inventory
hiking from the pandemic but
they got back on track in 2021.
Likewise, the inventory turnover
of GPH follows a very similar
pattern, perhaps resembling the
industry patterns.
Cross-sectional: Both companies
follow a similar pattern, but
BSRM seems to recover better
than GPH. This higher turnover
of BSRM translates to higher
sales volume in contrast to
inventory purchased.
4. Average age of inventory
Time-series: BSRM’s average
age of inventory soared in 2020,
meaning they couldn’t selloff
their inventory as frequently, but
in 2021 they seem to thing under
control.
GPH’s average age of inventory
follows a similar pattern, though
they were more susceptible to the
changes in sold inventory.
Cross-sectional: Similar to the
inventory turnover, both firms
had a poor 2020 but were able to
bounce back. BSRM’s lower age
of inventory reflects a higher sale
of inventory and better capacity
planning.
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5. Total Asset Turnover Ratio
Times-series: The TATO of
BSRM has been gradually
declining over the years,
reflecting a possible decline in
sales revenue.
GPH has also seen a drop in
TATO but made an increase in
2022. This most probably
reflects the increase in total
assets as they opened a new
plant.
Cross-sectional: BSRM’s TATO
has been consistently greater
than GPH since 2019, but this is
most likely due to BSRM
being an older firm than GPH.
Therefore, it can allocate higher
depreciation costs.
6. Average collection period
Time-series: BSRM’s collection
period decreased 77% in 2021.
This reflects an increase in
average sales.
GPH’s collection period
decreased by 53% to 43.64. This
number is still high, meaning
collecting receivables takes them
a long time.
Cross-sectional: BSRM’s
collection period has been
consistently lower than GPH's.
This indicates that they can
collect receivables earlier.
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7. Average payment period
Time-series: BSRM’s payment period increased in the
last year but is still
troublingly low. This
means that the firm had to
pay their suppliers
quicker than before which
might put pressure on
their short-term
operations.
GPH’s payment period
decreased but is still in a
very respectable value,
giving them greater
flexibility for short-term
operations.
Cross-sectional: GPH is in a
better position than BSRM
regarding the payment period.
This gives them a superior ability
to handle their short-term
operations and finances.
Dept ratios
8. Debt ratio
Time series: BSRM. has financed
more than 50% of its funds from
creditors.
GPH remains in an detrimental
position as the company nearly
collects 80% of its funds are dept
financed
Cross-sectional: Both companies
have debt ratios exceeding 50%.
GPH is more reliant on dept for
financing than BSRM, putting it
in a better position.
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9. Times Interest Earned ratio
Time series: The operating
earnings of BSRM were
adequate to cover the required
interest expenses trough out
the years
GPH’s TIE ratio is on the rise,
meaning, its able to generate
enough operational profit to
cover interest expenses
.
Cross-sectional: Currently,
BSRM nearly doubles that of
GPH, indicating that the
company’s operations are
becoming more profitable.
Profitability ratios
10. Gross Profit Margin
Time Series: The fall of GPM
for BSRM indicates they are
finding it difficult to cover cost
of goods sold through sales.
GPH gross profit margin has
been going down exposing the
company to serious issues.
Cross-sectional: GPH
continually preserves a more
favorable gross profit ratio as
opposed to BSRM. Though its
downward trend is matter of
concern
11. Operating profit margin
Time series: The operating
margin ratio of BSRM has
been steadily rising over time,
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which suggests that that the company generates a sufficient profit to pay for its operating
expenditures.
GPH operating margin ratio is gradually declining, thereby making it more challenging for
the company to pay for its rising expenses for operations.
Cross-sectional: GPH has a higher operating margin ratio than BSRM Nevertheless, GPH
ratio has been steadily declining over time, which doesn't look favorable for the company's
future. Conversely, the rising growth ratio of BSRM Steel Ltd. will contribute to further
profitable company operations.
12. Net profit Margin
Time series: The net profit
margin of BSRM took a dip
during 2020 but is seemingly
on the rise. This will give them
more free cashflow and
maximize shareholder wealth.
On the other hand, GPH failed
to sustain consistency
throughout the years. The
business's profit ratios sharply
tumbled in 2020 going from
before increasing drastically in
2021.
Cross-sectional: The net
margin ratios of BSRM and
GPH both saw significant
fluctuations. Despite having a
smaller margin ratio than GPH,
BSRM managed to increase in
the approaching years.
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13. Earnings per share
Time-series: BSRM’s EPS
increased last year, though it
took a dip in 2020, likely
resulting from a decline in
profits.
According to the income
statement, GPH’s EPS follows
a similar pattern, likely due to
higher costs during the
pandemic, resulting in fewer
profits.
Cross-sectional: Both
companies saw a dip in EPS in
2020, likely due to the
pandemic increasing costs, but
BSRM has consistently had a
higher EPS, meaning they also
see higher profits.
14. Return on assets
Time-series: BSRM’s ROE
graph shows great recovery
from the firm as the
quadruple its ROE from
2020 to 2021. This indicates
that the firm was able to
garner greater profits from
assets.
GPH’s ROE took a very
significant hit in 2020 but
they recovered a great deal in
2021. A result of generating
greater profits and better
utilization of assets
Cross-sectional: Both firms
follow a similar pattern, but
it is evident that BSRM has
better ROE throughout the
years, a greater portion of
assets invested has been
utilized to generate profits
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15. Return on equity
Time-series: BSRM’s ROE took
a severe hit in 2020 but currently
it is surging up, meaning it using
shareholder investments more
efficiently to generate profits
GPH’s ROE went up almost 4
times in 2021 after it had
faltered in 2020, indicating that
the firm has used their
shareholder investments.
Cross-sectional: Both firm
follow a very similar trends
through the years but GPH has
consistently outperformed
BSRM in regards to ROE
throughout the years. Meaning it
was better able to make efficient
use of shareholder investment to
generate profit
Market ratios
16. Price Earnings Ratio
Time Series: BSRM Steels
Limited’s P/E Ratio is on a
downward sloping trajectory.
The stock price has been
dropping steadily, which is the
most important factor here.
Likewise, GPH Ispat Limited is
also facing a bullish trend when
it comes to their P/E ratio. Their
stock prices have also declined
causing this fall.
Cross Sectional: BSRM Steels
Limited and GPH Ispat Limited
saw a reduction in their P/E
ratio. The market being shared
with more competitors are the
predicted cause for this decline.
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17. Market/Book Ratios
Time Series: The M/B Ratio of
BSRM Steels Limited saw a
downturn in 2020, but managed
to recover some of the deficit by
2021.
GPH Ispat Limited’s M/B ratio also took a hit in 2020, going from 2.0x down to 1.4x.
However, they covered most of the deficit within the following year.
Cross Sectional: BSRM Steels Limited and GPH Ispat Limited declined in their M/B ratio
recently, Among the two, GPH Ispat Limited was able to push their numbers back up better
compared to their counterparts in 2020-21.
Conclusion & recommendation:
After analyzing all the financial ratios, we conclude that BSRM STEEL LTD is the
better fit for investment. GPH ISPAT has been able to generate greater percentage of
profitability in recent years. This is reflected in its profitability ratios being better than BSRM
from 2019-2021. They also have a better M/B and P/E ratio which is a result of their higher
profits.
Nevertheless, it has an inferior state of liquidity, higher proportion of dept financing
and a lower TIE ratio. Indicating a higher level of financial leverage. It suggests that it is
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more vulnerable economic downturn and rising interest rate, especially considering their
profit margins follow a downward trend.
One the other hand, BSRM seems to have greater control over its short-term and long-
term operation, as its activity ratios are far healthier than GPH’s. Meaning it is more efficient
with the use of its resources, The higher liquidity ratios suggest that it is also better equipped
to meet short-term obligations. Even though, they are tracking behind regarding profitability
it is following an upward trend, which suggest improving financial health.
In conclusion, BSRM STEEL LTD is a more attractive investment proposition than
GPH ISPAT LTD because of its strong activity, dept and liquidity ratios complimented by its
improving profitability.
